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Australian banks need major capital boost to bullet-proof finances: regulator

Monday, July 13, 2015 - 08:13

Australia's major banks would need to increase their capital ratios by 200 basis points to make them "unquestionably strong" and place them among the top quartile of international lenders, the regulator said on Monday.

PHOTO: AFP

[SYDNEY] Australia's major banks would need to increase their capital ratios by 200 basis points to make them "unquestionably strong" and place them among the top quartile of international lenders, the regulator said on Monday.

The Australian Prudential Regulatory Authority (APRA) released the results of a study which found that although Australian banks are well-capitalised they lagged international peers in terms of capital reserves.

Even so, it said the study will not determine its approach to setting capital ratios for banks, most of which have already taken steps to boost capital and rein in more risky mortgage lending amid fears of a bubble in the Sydney and Melbourne housing markets. "APRA regards the top quartile positioning as a useful'sense check' of the strength of the Australian framework, but does not intend to tightly tie Australian requirements to a benchmark based on the capital adequacy ratios of international banks," it said.

Capital ratios at the major banks - Commonwealth Bank of Australia, Westpac Banking Corp, ANZ Banking Group and National Australia Bank - stand between 10-11.6 per cent.

They would need as much as A$48 billion to move to the top quartile, analysts estimated, after a government-backed review last year called for stronger capital levels for banks to ensure they can survive a global financial crisis.